The alleged offences occurred between 2005 and 2008, with the companies using a self-service tool called AdWords to set up the links.

If clicked on, the sponsored links took customers who were searching for one company to the website of a rival firm.

The Australian Competition and Consumer Commission (ACCC) said Google was liable for the misleading information under the Trade Practices Act, but Google argued it only displayed the ads and could not be held responsible.

Google successfully defended the action at first instance, before the ACCC won an appeal to the Full Court of the Federal Court.

However, the High Court has unanimously overturned that Full Court decision.

It found that Google did not itself create the sponsored links that it displayed, and ordinary users of the search engine would have understood they were ads and it was the advertisers making the representations not Google.

The court found that reasonable users would not have concluded that Google adopted or endorsed the representations.

The global internet search giant released a one-sentence statement welcoming the decision.

"We welcome the High Court's unanimous decision that Google cannot be held responsible for the ads that advertisers create for Google's search engine," a spokesperson said.

Consumer ramifications

The ACCC has also released a statement saying it will be assessing the ramifications of the decision for consumers in the internet age.

ACCC chairman Rod Sims says the regulator believed that providers of online content should be responsible for misleading or deceptive conduct when they have significant control over what is presented.

"The High Court's decision focused only on Google's conduct. In the facts and circumstances of this case the High Court has determined that Google did not itself engage in misleading or deceptive conduct," he noted in the statement.

"It was not disputed in the High Court that the representations made in sponsored links by advertisers were misleading or deceptive."

With internet search providers seemingly off the hook after this verdict, Mr Sims has warned companies placing ads online that they are still liable if they are found to be misleading consumers.

"It remains the case that all businesses involved in placing advertisements on search engines must take care not to mislead or deceive consumers," he added.